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Quorum Health Corporation Announces Third Quarter 2019 Results

BRENTWOOD, Tenn.--(BUSINESS WIRE)--

Third quarter net loss attributable to Quorum Health Corporation was ($75.9) million, or ($2.52) per share

Third quarter Adjusted EBITDA was $13.7 million and Same-facility Adjusted EBITDA was $30.6 million

Full year 2019 Same-facility net operating revenue guidance revised to $1.525 billion to $1.575 billion and Same-facility Adjusted EBITDA guidance revised to $140 million to $155 million

Quorum Health Corporation (QHC) (the “Company”) today announced financial and operating results for the third quarter ended September 30, 2019.

QUORUM HEALTH CORPORATION

Unaudited Financial Highlights

(In Millions)

 

 

 

Three Months Ended
September 30,

 

2019

 

2018

 

 

 

 

Net operating revenues

$419.9

 

$460.5

Net loss attributable to Quorum Health Corporation

($75.9)

 

($53.9)

Same-facility net operating revenues

$378.6

 

$389.3

Cash flows from operating activities

$25.2

 

$28.3

Adjusted EBITDA(1)

$13.7

 

$34.1

Same-facility Adjusted EBITDA(1 & 2)

$30.6

 

$42.0

(1)

A table providing supplemental information on Adjusted EBITDA, Same-facility Adjusted EBITDA and reconciling net loss to Adjusted EBITDA and Same-facility Adjusted EBITDA is included in this release, see footnote (a).

(2)

Same-facility Adjusted EBITDA was previously reported by the Company as Adjusted EBITDA, Adjusted for Divestitures. There has been no change in how the financial measure is being calculated.

“In the third quarter, we saw tangible evidence that our strategic initiatives are taking hold, with growth in both adjusted admissions and patient acuity. At the same time, we have experienced what we believe is a short-term deterioration in our revenue cycle performance, which accelerated as we approached the transition of our revenue cycle services to R1 RCM on October 1 of this year. Primarily due to this deterioration in our revenue cycle performance, we’ve adjusted our 2019 outlook downward. The transition of our back-office functions to R1 RCM began on October 1, 2019, and we have already begun to see improvement in many aspects of our revenue cycle activities. Going forward, we remain confident that R1 RCM will have a transformative impact on our business and the communities we serve,” said Bob Fish, Quorum Health’s President and Chief Executive Officer.

Financial results for the third quarter ended September 30, 2019 reflect the following:

  • Compared to the third quarter of 2018, same-facility net patient revenues decreased 2.5% or $9.2 million, while same-facility net patient revenues per adjusted admission decreased 2.7%. The decrease in same-facility net patient revenues and net patient revenues per adjusted admission were primarily attributable to the following:
    • An estimated $8 million impact from a decline in collectability on self-pay accounts receivable attributable to the aforementioned deterioration of revenue cycle activities ahead of the transition of these functions to R1 RCM;
    • A $4.2 million impact from a change in the timing of the Company’s recognition of revenues associated with the sale of property tax credits in Illinois compared to the third quarter of 2018; and
    • A $2.0 million impact as a result of the Company being unable to recognize revenues associated with the California Hospital Quality Assurance Fee (“HQAF”) program in the third quarter of 2019, which were recognized in the third quarter of 2018. The Company was unable to recognize these revenues as a result of having insufficient information regarding the HQAF VI program which began July 1, 2019. The Company expects that it will be able to recognize revenues from the HQAF program again in the fourth quarter of 2019.
  • Same-facility adjusted admissions increased 0.2% compared to the same period in 2018 and was primarily driven by a 2.5% increase in outpatient surgeries, which was partially offset by a 5.9% decrease in same-facility admissions and a 11.7% decrease in same-facility inpatient surgeries. The offsetting volume decreases were primarily attributable to the Company’s decision to discontinue certain underperforming service lines in the second quarter of 2019.
  • Cash flows from operating activities during the third quarter of 2019 were $25.2 million and included $6.6 million of cash costs associated with the closure of MetroSouth Medical Center in Blue Island, Illinois.
  • As of September 30, 2019, the Company had $1.2 billion of long-term debt and $44.4 million of cash. The Company had $777.7 million outstanding on its Term Loan Facility and $25.0 million outstanding on its ABL Credit Facility. The Company’s Net Secured Leverage Ratio as defined under the current Senior Credit Facility was 4.49 to 1.00, implying additional borrowing capacity of $89.6 million as of September 30, 2019.

Divestiture Update

  • On September 30, 2019, the Company completed the divestiture of 106-bed Watsonville Community Hospital in Watsonville, California to Halsen Healthcare. Cash proceeds from the transaction were approximately $39.9 million. Subsequent to the end of the third quarter, the Company used the proceeds from this transaction to repay outstanding principal on its Term Loan Facility.
  • As previously noted, the Company discontinued all hospital operations at 314-bed MetroSouth Medical Center in Blue Island, Illinois on September 30, 2019. The Company recognized $6.6 million of cash closure costs in the third quarter and expects to recognize an additional $3.0 million to $5.0 million of cash costs associated with the closure of this facility in the fourth quarter of 2019.

Financial Outlook

(In Millions)

2018 Actual

 

2019 Guidance
Range

Same-facility net operating revenues

$1,556.6

 

$1,525 - $1,575

Same-facility Adjusted EBITDA

$149.4

 

$140 - $155

Commenting on the Company’s financial outlook, Alfred Lumsdaine, Quorum Health’s Executive Vice President and Chief Financial Officer said, “We are lowering our financial outlook for the year in-light of our third quarter results, particularly the deterioration in the performance of our revenue cycle activities and a slower than expected realization of certain cost reduction initiatives. Given our results year-to-date and our expectations for the full year of 2019, we expect to enter into discussions with our secured lenders with the goal of modifying our covenants to ensure that we have the time and flexibility required to navigate this time of transition in our business. Long term, we continue to see tremendous opportunity for growth and improved profitability as our revenue cycle normalizes and improves through our relationship with R1 RCM.”

These projections are based on the Company’s historical operating performance, current economic, demographic and regulatory trends and other assumptions that the Company believes are reasonable at this time. See “Forward-Looking Statements” below for a list of factors that could affect the future financial and operating results of the Company or the healthcare industry generally.

A reconciliation of the Company’s projected 2019 Same-facility Adjusted EBITDA, a forward-looking non-GAAP financial measure, to net income (loss), the most directly comparable U.S. GAAP financial measure, is omitted from this press release because the Company is unable to provide such reconciliation without unreasonable effort. This inability results from the inherent difficulty in forecasting generally and in quantifying certain projected amounts that are necessary for such reconciliation. In particular, sufficient information is not available to calculate certain items required for such reconciliation without unreasonable effort, including interest expense, provision for (benefit from) income taxes and other adjustments that would be necessary to prepare a forward-looking statement of net income (loss) in accordance with U.S. GAAP. For the same reasons, the Company is unable to address the probable significance of the unavailable information.

Quorum Health Corporation will hold a conference call on Friday, November 8, 2019, at 11:00 a.m. Eastern time, to review its financial and operating results for the third quarter ended September 30, 2019. To participate, please dial 1-844-761-3024 approximately 10 minutes prior to the scheduled start of the call. If calling from outside of the United States, please dial 1-661-378-9914. Please reference Conference ID number 1237809 when prompted by the conference call operator. The conference call will also be webcast live from the Investor Relations portion of the Company’s website. A presentation will be made available during the call and will be found in the Investor Relations portion of the Company’s website at www.quorumhealth.com. For those who cannot listen to the live broadcast, a replay will be available shortly after the call and will continue to be available for approximately 30 days. Copies of this press release and the Company’s Current Report on Form 8-K (including this press release) will be available on the Company’s website at www.quorumhealth.com.

About Quorum Health Corporation

The principal business of Quorum Health Corporation is to provide hospital and outpatient healthcare services in its markets across the United States. As of September 30, 2019, the Company owned or leased 24 hospitals in rural and mid-sized markets located across 14 states and licensed for 2,038 beds. Through Quorum Health Resources LLC, a wholly-owned subsidiary, the Company provides hospital management advisory and healthcare consulting services to non-affiliated hospitals across the country. Over 95% of the Company’s net operating revenues are attributable to its hospital operations business.

The Company’s headquarters are located in Brentwood, Tennessee, a suburb south of Nashville. Shares in Quorum Health Corporation are traded on the NYSE under the symbol “QHC.” More information about the Company can be found on its website at www.quorumhealth.com.

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In Thousands, Except Earnings per Share and Shares)

 

 

 

Three Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

 

$ Amount

 

 

Revenues

 

 

$ Amount

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

419,900

 

 

 

100.0

%

 

$

460,507

 

 

 

100.0

%

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

215,457

 

 

 

51.3

%

 

 

226,237

 

 

 

49.1

%

Supplies

 

 

47,818

 

 

 

11.4

%

 

 

48,949

 

 

 

10.6

%

Other operating expenses

 

 

139,671

 

 

 

33.3

%

 

 

143,716

 

 

 

31.4

%

Depreciation and amortization

 

 

15,028

 

 

 

3.6

%

 

 

16,612

 

 

 

3.6

%

Lease costs and rent

 

 

11,121

 

 

 

2.6

%

 

 

11,661

 

 

 

2.5

%

Electronic health records incentives

 

 

(17

)

 

 

%

 

 

(31

)

 

 

%

Legal, professional and settlement costs

 

 

5,191

 

 

 

1.2

%

 

 

1,519

 

 

 

0.3

%

Impairment of long-lived assets and goodwill

 

 

8,010

 

 

 

1.9

%

 

 

32,438

 

 

 

7.0

%

Loss (gain) on sale of hospitals, net

 

 

1,206

 

 

 

0.3

%

 

 

805

 

 

 

0.2

%

Loss on closure of hospitals, net

 

 

18,414

 

 

 

4.4

%

 

 

1,111

 

 

 

0.2

%

Total operating costs and expenses

 

 

461,899

 

 

 

110.0

%

 

 

483,017

 

 

 

104.9

%

Income (loss) from operations

 

 

(41,999

)

 

 

(10.0

)%

 

 

(22,510

)

 

 

(4.9

)%

Interest expense, net

 

 

33,056

 

 

 

7.9

%

 

 

32,450

 

 

 

7.0

%

Income (loss) before income taxes

 

 

(75,055

)

 

 

(17.9

)%

 

 

(54,960

)

 

 

(11.9

)%

Provision for (benefit from) income taxes

 

 

137

 

 

 

%

 

 

(1,074

)

 

 

(0.2

)%

Net income (loss) (a)

 

 

(75,192

)

 

 

(17.9

)%

 

 

(53,886

)

 

 

(11.7

)%

Less: Net income (loss) attributable to noncontrolling interests

 

 

736

 

 

 

0.2

%

 

 

54

 

 

 

%

Net income (loss) attributable to Quorum Health Corporation

 

$

(75,928

)

 

 

(18.1

)%

 

$

(53,940

)

 

 

(11.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Quorum Health Corporation stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (b)

 

$

(2.52

)

 

 

 

 

 

$

(1.85

)

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

30,178,229

 

 

 

 

 

 

 

29,215,823

 

 

 

 

 

QUORUM HEALTH CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In Thousands, Except Earnings per Share and Shares)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

% of

 

 

 

 

 

 

% of

 

 

 

$ Amount

 

 

Revenues

 

 

$ Amount

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net operating revenues

 

$

1,304,875

 

 

 

100.0

%

 

$

1,419,959

 

 

 

100.0

%

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and benefits

 

 

653,943

 

 

 

50.1

%

 

 

705,868

 

 

 

49.7

%

Supplies

 

 

149,405

 

 

 

11.4

%

 

 

160,732

 

 

 

11.3

%

Other operating expenses

 

 

383,414

 

 

 

29.5

%

 

 

440,910

 

 

 

31.0

%

Depreciation and amortization

 

 

44,167

 

 

 

3.4

%

 

 

52,015

 

 

 

3.7

%

Lease costs and rent

 

 

34,279

 

 

 

2.6

%

 

 

35,551

 

 

 

2.5

%

Electronic health records incentives earned

 

 

592

 

 

 

%

 

 

(617

)

 

 

%

Legal, professional and settlement costs

 

 

6,480

 

 

 

0.5

%

 

 

10,349

 

 

 

0.7

%

Impairment of long-lived assets and goodwill

 

 

42,820

 

 

 

3.3

%

 

 

72,198

 

 

 

5.1

%

Loss (gain) on sale of hospitals, net

 

 

2,346

 

 

 

0.2

%

 

 

8,927

 

 

 

0.6

%

Loss on closure of hospitals, net

 

 

18,414

 

 

 

1.4

%

 

 

18,195

 

 

 

1.3

%

Total operating costs and expenses

 

 

1,335,860

 

 

 

102.4

%

 

 

1,504,128

 

 

 

105.9

%

Income (loss) from operations

 

 

(30,985

)

 

 

(2.4

)%

 

 

(84,169

)

 

 

(5.9

)%

Interest expense, net

 

 

98,904

 

 

 

7.6

%

 

 

95,307

 

 

 

6.7

%

Income (loss) before income taxes

 

 

(129,889

)

 

 

(10.0

)%

 

 

(179,476

)

 

 

(12.6

)%

Provision for (benefit from) income taxes

 

 

386

 

 

 

%

 

 

(1,162

)

 

 

%

Net income (loss) (a)

 

 

(130,275

)

 

 

(10.0

)%

 

 

(178,314

)

 

 

(12.6

)%

Less: Net income (loss) attributable to noncontrolling interests

 

 

1,532

 

 

 

0.1

%

 

 

1,200

 

 

 

%

Net income (loss) attributable to Quorum Health Corporation

 

$

(131,807

)

 

 

(10.1

)%

 

$

(179,514

)

 

 

(12.6

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share attributable to Quorum Health Corporation stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted (b)

 

$

(4.41

)

 

 

 

 

 

$

(6.21

)

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

29,875,196

 

 

 

 

 

 

 

28,891,363

 

 

 

 

 

QUORUM HEALTH CORPORATION

UNAUDITED CONSOLIDATED SELECTED OPERATING DATA

 

 

 

Three Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,038

 

 

 

2,604

 

 

 

(566

)

 

 

(21.7

)%

Admissions (d)

 

 

15,453

 

 

 

17,797

 

 

 

(2,344

)

 

 

(13.2

)%

Adjusted admissions (e)

 

 

42,089

 

 

 

45,536

 

 

 

(3,447

)

 

 

(7.6

)%

Surgeries (f)

 

 

16,883

 

 

 

17,927

 

 

 

(1,044

)

 

 

(5.8

)%

Emergency room visits (g)

 

 

127,168

 

 

 

135,231

 

 

 

(8,063

)

 

 

(6.0

)%

Medicare case mix index (h)

 

 

1.43

 

 

 

1.42

 

 

 

0.01

 

 

 

0.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-facility: (i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,038

 

 

 

2,038

 

 

 

 

 

 

%

Admissions (d)

 

 

13,337

 

 

 

14,175

 

 

 

(838

)

 

 

(5.9

)%

Adjusted admissions (e)

 

 

37,590

 

 

 

37,500

 

 

 

90

 

 

 

0.2

%

Surgeries (f)

 

 

14,712

 

 

 

14,860

 

 

 

(148

)

 

 

(1.0

)%

Emergency room visits (g)

 

 

109,529

 

 

 

109,928

 

 

 

(399

)

 

 

(0.4

)%

Medicare case mix index (h)

 

 

1.41

 

 

 

1.43

 

 

 

(0.02

)

 

 

(1.4

)%

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,038

 

 

 

2,604

 

 

 

(566

)

 

 

(21.7

)%

Admissions (d)

 

 

49,562

 

 

 

56,546

 

 

 

(6,984

)

 

 

(12.4

)%

Adjusted admissions (e)

 

 

127,027

 

 

 

140,282

 

 

 

(13,255

)

 

 

(9.4

)%

Surgeries (f)

 

 

51,515

 

 

 

57,628

 

 

 

(6,113

)

 

 

(10.6

)%

Emergency room visits (g)

 

 

387,724

 

 

 

424,417

 

 

 

(36,693

)

 

 

(8.6

)%

Medicare case mix index (h)

 

 

1.45

 

 

 

1.43

 

 

 

0.02

 

 

 

1.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-facility: (i)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of licensed beds at end of period (c)

 

 

2,038

 

 

 

2,038

 

 

 

 

 

 

%

Admissions (d)

 

 

41,310

 

 

 

44,052

 

 

 

(2,742

)

 

 

(6.2

)%

Adjusted admissions (e)

 

 

109,939

 

 

 

113,193

 

 

 

(3,254

)

 

 

(2.9

)%

Surgeries (f)

 

 

43,967

 

 

 

45,867

 

 

 

(1,900

)

 

 

(4.1

)%

Emergency room visits (g)

 

 

324,915

 

 

 

333,445

 

 

 

(8,530

)

 

 

(2.6

)%

Medicare case mix index (h)

 

 

1.44

 

 

 

1.43

 

 

 

0.01

 

 

 

0.7

%

QUORUM HEALTH CORPORATION

UNAUDITED CONSOLIDATED SELECTED OPERATING DATA

 

 

 

Three Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

$ Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient revenues

 

$

401,552

 

 

$

440,731

 

 

$

(39,179

)

 

 

(8.9

)%

Non-patient revenues

 

 

18,348

 

 

 

19,776

 

 

 

(1,428

)

 

 

(7.2

)%

Total net operating revenues

 

$

419,900

 

 

$

460,507

 

 

$

(40,607

)

 

 

(8.8

)%

Net patient revenues per adjusted admission

 

$

9,541

 

 

$

9,679

 

 

$

(138

)

 

 

(1.4

)%

Net operating revenues per adjusted admission

 

$

9,977

 

 

$

10,113

 

 

$

(136

)

 

 

(1.3

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Same-facility:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient revenues

 

$

360,684

 

 

$

369,904

 

 

$

(9,220

)

 

 

(2.5

)%

Non-patient revenues

 

 

17,950

 

 

 

19,432

 

 

 

(1,482

)

 

 

(7.6

)%

Total net operating revenues

 

$

378,634

 

 

$

389,336

 

 

$

(10,702

)

 

 

(2.7

)%

Net patient revenues per adjusted admission

 

$

9,595

 

 

$

9,864

 

 

$

(269

)

 

 

(2.7

)%

Net operating revenues per adjusted admission

 

$

10,073

 

 

$

10,382

 

 

$

(309

)

 

 

(3.0

)%

...

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

$ Variance

 

 

% Variance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net patient revenues

 

$

1,247,605

 

 

$

1,354,588

 

 

$

(106,983

)

 

 

(7.9

)%

Non-patient revenues

 

 

57,270

 

 

 

65,371

 

 

 

(8,101

)

 

 

(12.4

)%

Total net operating revenues

 

$

1,304,875

 

 

$

1,419,959

 

 

$

(115,084

)

 

 

(8.1

)%

Net patient revenues per adjusted admission

 

$

9,822

 

 

$

9,656

 

 

$

166

 

 

 

1.7

%

Net operating revenues per adjusted admission

 

$

10,272

 

 

$

10,122

 

 

$

150

 

 

 

1.5

%